Kasikornbank's weakening non-interest income to be the key focal point in 2018

It will define how much the bank's earnings will recover.

According to Maybank Kim Eng, the bottom for earnings may already be behind us thanks to falling credit cost. However, Kasikornbanks' weakening non-interest income (especially transaction fee income, bancassurance and gains from investments) will be the key focal point in 2018 and this will define how much the bank’s earnings will recover.

Here's more from Maybank Kim Eng:

We cut FY18-19E earnings by c12% mainly due to our lower net interest margin and weakening non-interest income assumptions. It is worth mentioning that we anticipate non-interest income to contract by 1% YoY in 2018 as PromptPay will hit the bank’s transaction fee if it proves successful (4% of total operating income).

And with AIA’s (#1 in life insurance market) bancassurance partnership with BBL, Muangthai Life Assurance (#2), KBANK’s lifeinsurance subsidiary, will face greater competition, possibly impacting KBANK’s net insurance income (7% of total operating income).

After rolling forward valuation tonext year and lowering our risk-free rate assumption, our GGM-based TP is raised 5% to THB200 from THB19.